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ASIC accepts CBA subsidiaries’ EU

The Australian Securities and Investments Commission (ASIC) has accepted an enforceable undertaking (EU) from Commonwealth Bank of Australia subsidiaries following an investigation into their fees-for-no-service conduct.

The conduct was in relation various ongoing service packages that were offered by Commonwealth Financial Planning (CFP) and BW Financial Advice (BWFA).

ASIC found both subsidiaries failed to provide or failed to locate evidence regarding the provision of annual reviews to around 31,500 ongoing service customers in the period from July 2007 to June 2015 for CFP and from November 2010 to June 2015 for BWFA.

As BWFA stopped trading in October 2016, CFP is the focus of the compliance improvements required under the EU.

Under the EU, both subsidiaries are required to pay a community benefit payment of $3 million, while CFP has to provide an attestation from senior management that specifies the material changes that have been made to CFP’s compliance systems and processes in response to the misconduct.

CFP also has to demonstrate it has taken reasonable steps to identify and remediate its ongoing service customers to whom CFP did not provide annual reviews in the period from July 2015 to January 2018.

In addition to the EU, CFP and BWFA have also agreed to compensate around 31,500 affected customers in the period from July 2007 to June 2015 for CFP and from November 2010 to June 2015 for BWFA.

The compensation program is nearing its conclusion and as at 28 February, CFPL and BWFA had paid or offered to pay around $88 million plus interest to these customers, with the total compensation estimated at $88.6 million, plus interest.

ASIC deputy chair Peter Kell said: “Our report into fees-for-no-service in October 2016 identified the major financial institutions’ systemic failures in this area, and called for fair compensation to be paid to customers who did not receive the advice reviews that they were promised and paid for.”

Kell said this EU followed another EU recently accepted by ASIC from ANZ for similar conduct.

“These failures show that all too often the financial institutions prioritised revenue and fee generation over the delivery of advice and services paid for by their customers,” he said.

The EU was accepted by ASIC as part of the Wealth Management Project to address systemic failures by financial institutions and advisers over a number of years.

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